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LEASES | 9 Months Ended
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Sep. 30, 2021
LEASES [Abstract] |
LEASES |
5) | LEASES
The Company has operating leases for office and laboratory space in the boroughs of Brooklyn and Manhattan in New York, New York, which expire in 2025 and 2026, respectively. In June 2021, the Company entered into an additional lease agreement to lease approximately 2,700 square feet of office and laboratory space in Cambridge, Massachusetts for approximately $56.00 per square foot annually. The lease provides for annual escalation of the base rent based on the year-over-year increase of the consumer price index, as well as the payment of other customary expenses, such as common area maintenance fees, property taxes, and insurance. Upon entering into the lease agreement, the Company paid a lease deposit of $25,331. The lease expires in June 2028. The Company adopted ASC Topic 842, Leases, on December 31, 2020 using the modified transition method without retrospective application to comparative periods. The Company elected the package of three practical expedients allowed for under the transition guidance. Accordingly, the Company did not reassess: (1) whether any expired or existing contracts are/or contain leases; (2) the lease classification for any expired or existing leases; or (3) initial direct costs for any existing leases. The Company has also elected not to recognize right-of-use assets (“ROU assets”) and lease liabilities for short-term leases that have a term of 12 months or less. Operating lease liabilities represent the present value of lease payments not yet paid. ROU assets represent the Company’s right to use an underlying asset and are based upon the operating lease liabilities adjusted for prepaid or accrued lease payments, initial direct costs, lease incentives and impairment of operating lease assets. As the rate implicit in the lease is not readily determinable, the Company used its incremental borrowing rates based on the information available at the lease commencement date in determining the present value of lease payments. To determine the present value of lease payments not yet paid, the Company estimates secured borrowing rates corresponding to the maturities of the leases. The Company has elected the practical expedient to not separate non-lease components from the lease components to which they relate and instead account for each as a single lease component for all underlying asset classes. Some leasing arrangements require variable payments that are dependent on usage or may vary for other reasons, such as payments for insurance, tax payments and other miscellaneous costs. The variable portion of lease payments is not included in the ROU assets or lease liabilities. Rather, variable payments, other than those dependent upon an index or rate, are expensed when the obligation for those payments is incurred and are included in lease expenses. Accordingly, all expenses associated with a lease contract are accounted for as lease expenses. Operating leases are included in right of use assets - operating leases and operating lease liabilities, current and long-term, on the balance sheet. Lease expense for operating leases is recognized on a straight-line basis over the lease term and is included in general and administrative costs in the statements of operations. The Company recognizes operating lease expense and lease payments from the sublease on a straight-line basis in its statements of operations over the lease terms. During the three and nine months ended September 30, 2021, the net operating lease expenses were as follows:
|  | Three months ended September 30, 2021 |  |  | Nine months ended September 30, 2021 |
Operating lease expense |  | $ | 187,498 |  |  | $ | 501,097 |
Sublease income |  |  | (21,045 | ) |  |  | (62,116 | )
Variable lease expense |  |  | 5,625 |  |  |  | 15,977 |
Total lease expense |  | $ | 172,078 |  |  | $ | 454,958 |
The tables below show the beginning balances of the operating ROU assets and lease liabilities as of January 1, 2021 and the ending balances as of September 30, 2021, including the changes during the period.
|  | Operating Lease ROU Assets |
Operating lease ROU assets at January 1, 2021 |  | $ | 2,092,878 |
Amortization of operating lease ROU assets |  |  | (242,849 | )
Addition of operating lease ROU assets |  |  | 815,799 |
Operating lease ROU assets at September 30, 2021 |  | $ | 2,665,828 |
|  | Operating Lease Liabilities |
Operating lease liabilities at January 1, 2021 |  | $ | 2,178,612 |
Principal payments on operating lease liabilities |  |  | (225,618 | )
Addition of operating lease liabilities |  |  | 865,798 |
Operating lease liabilities at September 30, 2021 |  |  | 2,818,792 |
Less non-current portion |  |  | 2,410,667 |
Current portion at September 30, 2021 |  | $ | 408,125 |
As of September 30, 2021, the Company’s operating leases had a weighted-average remaining life of 5.1 years with a weighted-average discount rate of 12.76%. The maturities of the operating lease liabilities are as follows:
|  | As of September 30, 2021 |
2021 |  | $ | 183,877 |
2022 |  |  | 750,335 |
2023 |  |  | 767,154 |
2024 |  |  | 784,504 |
2025 |  |  | 802,358 |
Thereafter |  |  | 512,534 |
Total payments |  |  | 3,800,762 |
Less imputed interest |  |  | (981,970 | )
Total operating lease liabilities |  | $ | 2,818,792 |
Sublease Agreement On April 18, 2019, the Company entered into a sublease agreement with Nezu Asia Capital Management, LLC (the “Tenant”), whereby the Tenant agreed to sublease approximately 999 square feet of space currently rented by the Company in the borough of Manhattan in New York, New York for an initial term of eight years, commencing on May 15, 2019. The term of the sublease expires on October 31, 2026 with no option to extend the sublease term. Rent payments provided by the Tenant under the sublease agreement began on September 1, 2019. The sublease agreement stipulates an annual rent increase of 2.25%. The Tenant is also responsible for paying to the Company all tenant energy costs, annual operating costs, and annual tax costs attributable to the subleased space during the term of the sublease.
|  | As of September 30, 2021 |
2021 |  | $ | 20,458 |
2022 |  |  | 82,419 |
2023 |  |  | 84,194 |
2024 |  |  | 86,010 |
2025 |  |  | 87,867 |
Thereafter |  |  | 74,590 |
|  | $ | 435,538 |
The Company received sublease payments in the amount of $62,116 during the nine months ended September 30, 2020. In accordance with ASC Topic 842, the Company treats the sublease as a separate lease, as the Company was not relieved of the primary obligation under the original lease. The Company continues to account for the Manhattan lease as a lessee and in the same manner as prior to the commencement date of the sublease. The Company accounts for the sublease as a lessor of the lease. The sublease is classified as an operating lease, as it does not meet the criteria of a sale-type or direct financing lease.

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- Definition The entire disclosure for operating leases of lessee. Includes, but is not limited to, description of operating lease and maturity analysis of operating lease liability. + References Reference 1: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 842 -SubTopic 20 -URI http://asc.fasb.org/subtopic&trid=77888251 + Details
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